LIVE MARKETS As Nasdaq 100 futures tumble, all eyes on yields

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AS NASDAQ 100 FUTURES TUMBLE, ALL EYES ON YIELDS (0900 EST/1400 GMT)

Futures tracking the technology-heavy Nasdaq 100 index (.NDX) are slumping around 1.5% on Tuesday as traders return from a long holiday weekend to position for a more hawkish Federal Reserve ahead of a policy meeting next week.

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This, after the U.S. 10-Year Treasury yield held support last week in the 1.7050%/1.6930% area. Indeed, the yield hit a low of 1.6940% on Thursday and has since vaulted to a high of 1.8550% on Tuesday.

Meanwhile, the rolling 10-day correlation between CME e-mini Nasdaq 100 futures and the 10-Year yield, hit -0.88 last week, or a near perfect negative correlation (-1). On Tuesday, the reading has moved up, but remains a robust -0.72.

Of note, however, with its 1.8550% high, the 10-year yield neared a weekly Gann line on the charts, which now resides around 1.87%:

US10YYGF01182022

A Gann fan is a series of lines drawn at specific angles from important highs and lows. The line in question capped the yield rise into late-March 2021, which then led to a significant decline.

The yield has since backed away slightly. Thus, traders will be watching to see where the yield finishes on a weekly basis vs this Gann line.

A reversal, which takes out 1.6930%, can suggest the potential for a greater fall in yield. And if the inverse correlation with the Nasdaq 100 futures holds up, it would likely coincide with a recovery in tech/growth shares.

A weekly yield close above 1.87%, however, can suggest room for a much greater rise in yields based on the Gann chart. Additional lines are above 2.20%.

In that event, with a still strong negative correlation, the Nasdaq 100 futures could be vulnerable to a much greater fall.

(Terence Gabriel)

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Terence Gabriel is a Reuters market analyst. The views expressed are his own

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